Christmas might be a time for giving, but the common perception is that it’s not a time for investing.
However, as John Auckland of TribeFirst reveals, funding statistics surprisingly show that December can be a great month to find investment for your business.
The general consensus is that no one wants to run an equity crowdfunding campaign over the Christmas holidays, because nobody is going to invest when they have a stomach full of turkey and mince pies.
I also think it’s a psychological thing – everyone wants to close their investment round well before the end of the year.
But the New Year is a mental construct – it doesn’t really exist. And investors finally have some all-important time on their hands over the holidays. So, for the entrepreneur that’s willing to work for it, there is investment funding available over the festive season.
I reviewed the data on crowdfunding data programme, TAB, and amazingly it appears that December was the most funded month in the crowdfunding sector in 2017. In total, £123m was pledged across 199 campaigns, versus January, February and May of the same year, each of which experienced just over £40m in pledges.
So, why is December such a good time to raise funding for your business?
1. Investors have more free time
As I mentioned above, investors have more free time in December. Pre-Internet, the investment community would shut down over the summer months and Christmas, but that’s simply not true anymore.
2. Closing off a funding round before the New Year
As mentioned earlier in the article, many entrepreneurs want to close their funding round before the end of the year – they hustle harder so they’re not campaigning over the holidays.
Given the amount of liquidity there seems to be over the Christmas period, I would take advantage of this and plan activity for the week between Christmas and New Year – a time where lots of investors will be browsing, but not many entrepreneurs will be active online.
Not everyone wants to spend their annual bonus on presents and parties. Bonuses are paid at many different times of the year, but Christmas is the most common.
Bankers usually get their bonuses in January, so that’s typically considered a more liquid month for traditional investing. However, crowdfunding appeals to retail investors – ‘everyday’ people who are far more likely to get a bonus before they finish work for the year.
4. Filing tax returns
Many people like to take the time during the holidays to file their tax return before the end of January deadline.
Often this is the first time an investor realises how much EIS or SEIS tax relief allowance they have left to use. I know many investors who will invest as much as their income tax relief allows them to.
5. The ‘holiday effect’
This article in Psychology Today talks about how stock markets often experience the “holiday effect”, which causes them to be more optimistic about the state of the market due to their mood.
A study by George Marrett and A. C. Worthington concluded that investors are more likely to be in a buying state of mind due to “high spirits” and “holiday euphoria”. They even went as far as to argue that the holiday effect accounts for some 30 to 50 per cent of the total return on the US market in the pre-1987 period.
So, what does this mean for unlisted private companies raising funds through crowdfunding? I would argue their investors are just as likely to experience the holiday effect. In fact, given the highly risky nature of early stage startup investing,
I would further argue that the holiday effect is even more pronounced – it might encourage an investor to express greater risk appetite than they would normally do. Great news then for companies that are campaigning during the holidays.
In summary, Christmas isn’t such a bad time to run your crowdfunding campaign after all. However, the all-consuming nature of running a campaign means that you will be distracted from important family time. Just pre-warn your nearest and dearest so you don’t find yourself in the doghouse on Christmas Day!
About the author
This guide has been written exclusively for ByteStart by John Auckland, a crowdfunding specialist and founder of TribeFirst. Tribefirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns, and has helped raise in excess of £14.5m for over 50 companies. John is a regular contributor to ByteStart, and you can benefit from more of his expertise and insight into crowdfunding in;
- How to get investors to back your crowdfunding campaign
- 7 Fundraising Mistakes that will stop investors from investing in your company
- How to prepare your business for crowdfunding
- Equity v Rewards Crowdfunding: Which is best for me?
- How the new EIS Guidelines impact crowdfunding
More from ByteStart
ByteStart is packed with help and tips on all aspects of starting and funding your business. Check out some of our most popular guides;
Funding your business
- How to maximise your chances of securing a small business loan
- How the Enterprise Investment Scheme (EIS) can help you raise funding to grow your business
- What to do when the bank says “NO”
- Revolving Credit Facility – The short term funding solution every small business owner should know about
- Invoice Finance – What is it and how can it help my business?
- The way to get paid – 12-Step Action Plan to stop customers from paying you late
- 10 Advantages running your business as a limited company has over being a sole trader
- How to set up a limited company
- Which types of insurance must your business have?